10 Reasons Why Many Stock Investors Lose Money

The Stock Market Is Nothing But A Gamble.

"The Key To Investing Successfully Is Luck,"

"The Stock Market Is The Quickest Route To Financial Ruin."

How frequently do you hear the aforementioned or comparable phrases being used? In fact, if you looked at how the ordinary individual views the stock market, you would be persuaded that it is hell on earth. On the other hand, every now and then you hear about those folks who are profiting greatly from the market. You could have questioned how a few number of people were able to profit from the market when other people lost money. Is there a secret recipe?

But first, let's slightly reverse the situation. Losses on the stock market can either be attributed to the market or the investor. Contrary to popular belief, the investor is to responsible for market failure, not the market itself. Why? because the Indian stock market has consistently had an upward tendency throughout time, like the majority of global stock markets. In 1991, the Sensex had ended at 1,908 points. The Sensex is currently trading at about 51,700. Do you still believe that the market is the issue?

Why then do the majority of investors lose money? This is where the holy grail is found. The solution had always been there; it just needed to be placed in the appropriate setting. It can be found in the stock investment gurus' words. Here is a condensed version of the gurus' knowledge that will give you the key to succeeding in the stock market.

I.    NOT REALIZING WHAT COMMON STOCKS ARE

Although it's easy to forget sometimes, a share is not a lottery ticket... it's part-ownership of a business.
- Peter Lynch

Behind every stock is a company. Find out what it's doing.
- Peter Lynch

II.    BUYING STOCK WITHOUT FIRST STUDYING THE BUSINESS

Know what you own, and know why you own it.
- Peter Lynch

If you don't study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
- Peter Lynch

III.    NOT INVESTING OR MAINTAINING INVESTMENT IN A GOOD STOCK DURING A CRISE

Unless you can watch your stock holding decline by 50 per cent without becoming panic-stricken, you should not be in the stock market.
- Warren Buffett

Cash combined with courage in a time of crisis is priceless.- Warren Buffett

IV.    not exercising patience, discipline, or long-term thinking

If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes.

- Warren Buffett

Successful Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can't produce a baby in one month by getting nine women pregnant.
- Warren Buffett

V.    STOCK TRADING AND DERIVATIVES ABUSE

Derivatives are financial weapons of mass destruction.
- Warren Buffett

As in roulette, same is true of the stock trader, who will find that the expense of trading weights the dice heavily against him.
- Benjamin Graham

VI.    BUYING THE STOCK FOR TOO MUCH

If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume.

- Benjamin Graham

Confronted with a challenge to distill the secret of sound investment into three words, we venture the motto, Margin of Safety.
- Benjamin Graham

VII.    FOLLOWING THE CROWD BLINDLY

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
- Warren Buffett

Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.
- Warren Buffett

VIII.    AVOIDING SOUND INVESTING PRINCIPLES IN ACCORDANCE WITH THE LATEST CRAZE

The individual investor should act consistently as an investor and not as a speculator.
- Benjamin Graham

With every new wave of optimism or pessimism, we are ready to abandon history and time-tested principles; but we cling tenaciously and unquestioningly to our prejudices.
- Benjamin Graham

IX.    UNDERESTIMATING YOUR INVESTMENT ABILITY

Twenty years in this business convince me that any normal person using the customary three percent of the brain can pick stocks just as well, if not better, than the average Wall Street expert.

- Peter Lynch

If you have more than 120 or 130 I.Q. points, you can afford to give the rest away. You don't need extraordinary intelligence to succeed as an investor.
- Warren Buffett

X.    AUTHENTICATE YOUR INVESTMENT POTENTIAL

It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.

- Charlie Munger

Rule #1: Never lose money; Rule #2: Never forget Rule #1.
- Warren Buffett